How Do Portable Mortgages Work?

A traditional mortgage allows you to buy a home one time – it’s tied to that property and you’re going to be stuck with it until the end of the mortgage. Even if you move, any proceeds from the sale will have to go directly to the mortgage lender before you see a cut of the action; this can lead to problems buying a new home, or leave you in mortgage limbo when you can’t sell the house fast enough. Portable mortgages are the answer! If you want the freedom to move and don’t mind paying a slightly higher interest rate, these can help.

What is a Portable Mortgage?

A portable mortgage is just what it sounds like – a mortgage that moves with you. You won’t have to worry about things like hiring a realtor when you move, making sure you find a seller or even worse paying closing costs. You’re going to make sure that you’ll be moving atleast once during the term of the mortgage, or you won’t be able to get much out of this. You’re going to pay more in interest than you would with a tradition mortgage – but if you add in all the cost of hiring a realtor and getting another mortgage, it’s a great way to save.

Why Do These Cost More?

They’re more of a benefit for people who’ve been paying their bills on time and have good credit, so they’re not really able to charge a lot more for them. You’ll see a few extra points of interest added on to your mortgage bill; if you have bad credit, however, you may have some trouble qualifying for this kind of a mortgage. This is when you’re going to want to talk to your loan officer, a debt consolidation specialist or someone that understands how portable mortgages work. Even a 10% jump in your credit score can help you avoid paying thousands of dollars of extra interest over the life of your loan.

Can You Qualify?

You’re going to need to have a very good relationship with your lender, as well as a credit score over 600. If you only have good credit or just a good relationship with your lender, you may still be able to qualify. If you’re not sure if you can qualify, it never hurts to talk to a Canada mortgage broker to see if you have any options. Many portable mortgages only transfer one time, so if you’re thinking about moving multiple times you may need to work with a broker to research which lender will be able to fit your needs best. Always ask how many times a mortgage is portable – and what the requirements are before you can port. If you have to be in the same province and you move from coast to coast regularly, this might not be a good fit for you.

It all comes down to figuring out how much a portable mortgage will really help you. If you might move once, it can help a lot – but if you’re settling for the next 20 years in the same house, think about going with a conventional or private mortgage instead.

Erin Thompson is a mortgage broker and financial blogger for Homebase Mortgages. HBM is a Toronto mortgage broker that provides home mortgages, mortgages for the self-employed, home equity loans and lines of credit, debt consolidation, private mortgage lending and second mortgages. For more information on portable mortgages visit: http://www.homebasemortgages.ca/home-mortgages/portable/